USD weakness is a key reason for AUD/USD reaching 0.80 - Westpac

US dollar weakness is a key reason for AUD/USD reaching 0.80 for the first time since Sep 2017, but there has been considerable support from commodity prices, with Westpac’s daily index of Australia’s commodity export basket (WCFIAECI on Bloomberg) up 4-5% since early Dec when AUD/USD was testing 0.75, explains Sean Callow, Research Analyst at Westpac.

Key Quotes

“Some offset in terms of AUD fair value though comes from AU-US yield spreads moving against the Aussie. As the chart shows, short term fair value looks to be a little over 77c, so the test of 80c seems rather overdone.”

“Dollar sentiment should be key in the week ahead. If the BoJ and ECB push back hard on tapering/rate hike chatter respectively then AUD/USD should find the 0.80 handle remains hard to sustain, with most trade high 0.78s to high 0.79s.”